An empirical study of the relationship between performance based pay and job satisfaction

Abstract

Compensation management literature highlights that performance based pay has two major characteristics: participation in pay systems and adequacy of pay. The ability of management to properly implement such pay systems may lead to increased job satisfaction in organizations. The nature of this relationship is interesting, but little is known about the influence of performance based pay on job satisfaction in compensation management literature. Therefore, this study was conducted to examine the relationship between pay for performance and job satisfaction in Malaysian GIATMARA centers. The results of exploratory factor analysis confirmed that measurement scales used in this study satisfactorily met the standards of validity and reliability analyses. Outcomes of Stepwise Regression analysis showed that performance based pay significantly correlated with job satisfaction. Statistically, this result confirms that performance based pay does act as an important determinant of job satisfaction in the studied organizations. In addition, discussion, implications and conclusion are elaborated.